Chelsea is being investigated by the FA and Premier League for potential violations of Financial Fair Play regulations.

The Premier League and the Football Association are investigating Chelsea for potential violations of football regulations, such as financial fair play (FFP). Experts caution that the club may receive a points deduction if found guilty.

The governing authorities are investigating undisclosed payments made by businesses owned by former owner of Chelsea, Roman Abramovich.

The Guardian and its global partners recently disclosed the undisclosed payments made to the club, which were not reported in their yearly financial reports. With the increase in wealthy individuals investing in English football, other teams such as Everton and Manchester City are also being investigated.

What regulations may have been violated, what is the process of the investigation, and will any prominent soccer team face consequences for disregarding FFP?

What does financial fair play mean?

The acronym FFP is commonly used to refer to multiple regulations, but it originated from a 2009 evaluation conducted by the governing body of European football, Uefa. The organization was worried about the increasing number of clubs that were overspending in their pursuit of success, accumulating unsustainable debts that put their survival at risk.

The set of guidelines implemented for the beginning of the 2011-12 season was known as the response. After two years, the Premier League created their own rendition of FFP, called the profitability and sustainability rules. As time has passed, these rules have been viewed not only as a means of guaranteeing the financial stability of football clubs, but also as a way to combat what former Arsenal manager Arsène Wenger referred to as “financial doping”. This refers to when affluent individuals, such as a billionaire oligarch or a Gulf state, unfairly influence competition by investing their own funds into a club in order to achieve success.

What are the guidelines?

The Premier League evaluates the financial statements of clubs annually and imposes a cap on the amount they can operate at a deficit. In simpler terms, clubs must not exceed a loss of £105m within a three-year span. However, certain expenses are not included in this calculation, such as investments in infrastructure (e.g. stadium and training ground), community initiatives, women’s football, and youth development. These are referred to as “add backs”.

Due to the pandemic, regulations were relaxed in recognition of the additional expenses clubs faced for health and safety measures, as well as the decline in revenue due to the absence of fans at stadium events.

The restrictions imposed by Uefa have undergone some changes and modifications over time. Starting from last year, clubs can now incur a loss of up to €60m under a revised football revenue regulation, which is twice the amount allowed under the previous FFP system. Additionally, there is a rule in place that limits expenditures on salaries, transfers, and agents’ fees to 70% of the club’s revenue.

How does this relate to Chelsea?

In 2022, a group headed by American investor Todd Boehly acquired Chelsea, following the sale of the club by Abramovich due to repercussions from his connections to the Kremlin. The consortium allocated £100m to account for any potential financial inquiries. As part of the acquisition process, the club revealed that incomplete financial data had been provided to football governing bodies from 2012 to 2019. Chelsea then voluntarily reported this to the Premier League, Uefa, and FA.

In July, Chelsea and Uefa agreed to a settlement of £8.7m regarding this matter, but there are still ongoing issues. Uefa has a time limit in place, which only allows them to review the 2018-19 season. However, the Premier League does not have any such restrictions and can go back as far as they want to impose penalties such as a points deduction or removal from competition.

What is the process for investigating breaches?

If the Premier League discovers a violation in a club’s yearly financial statements, or receives evidence indicating that those statements were incorrect, its governing body may accuse the club of violating the regulations outlined in the Premier League handbook.

After being charged, the case is brought before a judicial panel led by Murray Rosen KC, an experienced barrister specializing in sports law and serving as a deputy judge. Rosen has the authority to select three individuals from a pool of 15 to serve on the adjudication panel for the case. The chosen individuals are selected based on their relevant expertise, such as accounting or experience with arbitration.

Similar to a legal trial, attorneys representing both the club and the Premier League must present their arguments. This can often be a lengthy and private process, considering the significant financial and reputational consequences involved. Ultimately, a decision will be made by the judicial panel. Unlike a criminal trial, the verdict is based on the probability of the evidence, rather than requiring proof beyond a reasonable doubt.

If the club is deemed guilty, they have the option to appeal to a designated panel. However, this is their final opportunity. The case cannot progress to the legal system or the international court of arbitration for sports.

What is the situation regarding Manchester City and Everton?

Both teams have been accused of violating spending regulations, but both deny the allegations. In February 2023, Manchester City was charged by the Premier League for 115 violations. Some soccer supporters may think no further measures are being taken, but the investigation is still ongoing, although it is being kept confidential.

City, supported by the financial strength of Abu Dhabi, has enlisted prominent lawyer Lord Pannick KC to lead their defence. Pannick is known for advising Boris Johnson in the Partygate investigation. It has been reported that City has filed a complaint alleging that Rosen, the prosecutor, is an Arsenal fan. Although Arsenal and City are not typically considered rivals, they competed against each other for the Premier League championship last year and may do so again this season. The resolution of this case is expected to take a significant amount of time.

Everton is facing allegations of violating FFP regulations and may face a rapid decision that could result in a 12-point deduction, causing them to fall to the bottom of the standings. The club maintains its belief that it did not break any FFP regulations.

What other regulations are applicable?

Manchester City received multiple charges due to the fact that violating one rule often suggests a violation of another. For example, if a club breaks financial fair play regulations, it is possible that they have also provided false financial statements and acted dishonestly, both of which are prohibited.

Furthermore, the Football Association holds the authority to conduct investigations. This involves ensuring that agents accurately report the fees they receive for transfer deals. The FA has also announced an ongoing investigation into Chelsea, as disclosed earlier this week.